Modvat credit for production-related equipment in the administrative block was allowed based on actual use in manufacturing functions.

Modvat credit on UPS and air-conditioners installed in the administrative block was admissible because entitlement turned on actual use, not mere location. The equipment was shown to support engineering design, modifications, production planning, and other production-related functions, so it was treated as serving the manufacturing activity of the factory rather than as ordinary office appliances. Credit could not be denied, and the assessee was entitled to it.

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Issues: Whether Modvat credit is admissible on UPS and air-conditioners installed in the administrative block when they are used for production-related activities.

Analysis: The entitlement to credit depended on the actual use of the equipment rather than its mere location in the administrative wing. The record showed that the servers, computers and connected equipment were used for engineering design, modifications, production planning and other shop-floor and production-related functions. On that basis, the equipment was treated as serving the manufacturing activity of the factory and not as mere office appliances.

Conclusion: Modvat credit could not be denied, and the assessee was entitled to the credit.

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